A Discussion as the Dow Jones is 16 off its 52 Week Highs

January 20, 2016

DJIA 15,450

S&P 500 1812

A discussion as the Dow Jones is 16% off its 52 week highs

At the lowest level so far today, the market was at 15,450. which was 16% off of its 52 week high of 18351.36.
I believe this is a normal course correction, and that investors who invest with us should stay the course, and continue to invest as they have been investing. This is certainly not a guarantee of increased returns, but merely an assumption, which could turn out to be incorrect.

The economy certainly slowed down in November and December, as I watch truck and rail loadings, production and manufacturing indexes, and so forth. Consumer sentiment, as last reported is still relatively strong.

I think valuations of most of the companies we own are not only fairly priced, but at value levels.

The following are some companies we own, and some of which I follow, with todays quoted price, compared to their 52 week high, and the percentage gain or loss.

1/20/16 Intraday Price

52 Week High

% Loss

Apple (AAPL)

$93.42

$134.54

31%

AIG

$53.49

$64.93

18%

Amazon (AMZN)

$547.18

$696.44

21%

Bank of America

$13.27

$18.48

28%

Citigroup ( C )

$39.44

$60.95

35%

Conoco Phillips (COP)

$32.71

$70.11

53%

Chevron (CVX)

$75.33

$112.93

33%

Exelon (EXC)

$26.26

$38.25

31%

Intel (INTC)

$29.21

$37.03

21%

JP Morgan (JPM)

$54.66

$70.61

22%

Microsoft (MSFT)

$49.10

$56.85

14%

Gazprom (OGZPY)

$3.00

$6.25

52%

Public Service (PEG)

$38.14

$44.45

14%

Wal-Mart (WMT)

$60.20

$89.26

33%

Exxon (XOM)

$71.91

$93.45

23%

Jack Bogle founder of Vanguard Group spoke today on CNBC, and he suggested staying the course and sit tight.

Jamie Dimon, CEO of JP Morgan Chase was interviewed by CNBC at Davos Switzerland today, and he had some real good insights, which I will mention in this note. Below are quotes I put together of Mr. Dimon, and I did improvise on some of the words, but I do not think any of the intent or message has been altered at all.

Jamie Dimon CNBC January 20, 2016:

“China has scorned people with their reduction of growth, internal denial of debt levels and their stock market.”

“American economy continues to show strength, but growth is certainly slower.”

“I am hopeful that this market correction is merely a temporary adjustment. I think quick and painful would be the best adjustment. In a few months, I hope to talk to people about how painful it was a few months back, and that it turns out that things were not awful.”

“Consumers are spending money.”

“If oil stays at these prices ($27 per barrel), JP Morgan will have to increase their loss reserves.” He would have increased the loss reserves at December 31, 2015 if accounting rules would have let him. He could see an additional reserve of $750M in 18 months. “No matter, none of this will put JP Morgan in any danger.” He cannot envision any scenario that would put the operations or liquidity of JP Morgan in any danger.

He has been meeting full time with CEO’s in Davos, and all except those in the energy sector are saying, “We are doing okay.”

“If you are not nervous during corrections like this, you are crazy.”

“I cannot take shots at the government, because they shoot back.”

He was asked about his personal investing, and here was his response: “I like investing long-term. I like dividends. I would not buy treasuries at these levels. Principal might drop for a while, but I think now is a good time to buy. I think buying great long-term businesses is the best thing to do.”

In response to a question on the Fed and interest rate raising he said the following: “Normalization is a good thing. The first raises of 25, 50 and 75 basis points should not have a bad effect. In fact, raising rates will indicate the economy is strong enough to do so. The Fed should react to events, and not markets. We are getting too fine-tuned, and instead should watch the economy. If the economy chugs along, we can see increased interest rates.”

The Ten year yield was as low as 1.939% today, and the 52 week high was 2.489% (the 52 week low was 1.651%. He was asked if the 10 year Treasury Rate under 2% is worrisome. “I think the 10 year yield will go back up, when the world realizes the economy is not that bad.”

If you have any concerns, please reach out to me. I would be happy to speak with those who are not clients or ours as well. As always, we welcome the opportunity to discuss our outlook and investments with you.